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Lavaliere Samui, a collection of four premium villas in Koh Samui, Thailand, has become incredibly easy to own, due to an innovative approach. The tropical island paradise development promises solid investment yields, with no financing issues. The $1.8 million luxury property development, conceptualised and built by Impact Samui, has been made available via crowdfunding, affording investors the chance to own a piece of the exotic gem, starting at $50,000.

Crowdfunding in the real estate market is nothing new, according to crowdsourcing expert Clive Wright, founder of Singapore-based The CrowdHub Group. Wright said property crowdfunding functions in several forms, but the most common is lending, which currently plays a dominant role in property crowdfunding.

“At the moment, over 90 percent of property crowdfunding is lending,” Wright told ALFA Investors in an interview, adding that in the foreseeable future, crowdfunding will continue to grow, but that equity crowdfunding, or, as he terms it, crowd investing, is likely to make its presence felt in the property investment scene.

Overall, crowdfunding will certainly continue to expand. According to The CrowdHub Group: “It has ballooned exponentially” in recent years. “Over the next five years, the projected average growth per year is 17 percent” the company stated, which explains why significant property industry players are starting to offer this option to investors.

Property Crowdfunding Explained

The CrowdHub Group is convinced that equity crowdfunding will have a profound impact on the property market. Essentially, it will empower investors, big or small, to acquire a stake in a company that owns a specific property asset – ranging from an apartment to a whole development. The relatively low cash sum required makes it a lot easier to build a portfolio, through a spread of investments.

An excellent example is the Lavaliere Samui development, on which The CrowdHub Group is supporting ALFA Investors. The property’s nearly $2 million price tag may be beyond most investors’ reach, but crowdfunding allows an investment as low as $50,000. This is crowd investing in action, according to Wright.

Simply put, crowd investing is “buying shares in a company for the sole purpose of owning a property,” Wright said, adding that the typical investor seems most comfortable acquiring about 5 to 10 percent of a specific project, with perhaps two or three, more experienced, investors taking 10 to 20 percent stakes.

Benefits, Protection And Risks

As with all forms of investment, property crowdfunding carries risks. Should you want to make investments through a crowdfunding platform, you should be aware that regulatory models vary widely. Singapore, for example, follows the UK model quite closely, treating platforms as a development of angel investing, whereas the US treats crowdfunding as a stripped-down version of a stock exchange, Wright pointed out. “There are specific safeguards and limits that serve as protection for investors,” he added.

The Lavaliere Samui offers the mechanics of crowdfunding, but to an investor group already known to Alfa and The CrowdHub Group. The CrowdHub Group operates from Singapore, and Alfa from Hong Kong. In both places, regulations protect the investor well. Additional safeguards, for example the use of an escrow account supervised by a law firm, are in place in this case.

As with any investment or purchase of property, investors should seek advice from lawyers and finance professionals.

Most importantly, working with reputable partners, who have been tested in the market is key to mitigating potential risks, according to The CrowdHub Group, pointing to Alfa Investors as a great example of the care with which they choose who to work with.

“We work with people like Alfa, as we value their intense, deep and specialist knowledge. They are trustworthy, and have the necessary expertise to manage this kind of project,” Wright stressed, speaking for The CrowdHub Group.

By coming together in the form of crowdfunding, investors can focus on the returns of property, because all other details are taken care of. By purchasing the property in cash, the company is “free of debt and free of financing commitments, so the income from the property goes immediately to investors through payment of dividends”, according to Wright. In the case of Lavaliere, dividends will be paid quarterly.

“Our threshold is that over the next five years, a property must be reasonably expected to realise a minimum of 5 percent net income, and 5 percent capital gain per annum,” he added. Lavaliere is expected to easily outperform this.

Koh Samui’s property market is booming — and that is expected to continue

Looking to the future, Lavaliere is environmentally sustainable, which will have a positive impact on its capital appreciation. As Wright points out, the future value of a property has non-tangible elements. “An investor is buying a physical asset that has a story and a life. Lavaliere, for example, is gorgeous. You just have to look at the pictures and you can imagine yourself there. It’s in the right place and setting, and that is as much an asset to the property as the high-quality details,” he said.